The Hidden Cost of Vacation Rentals: Community Wellbeing and Tenant Displacement in High-Amenity Markets

From coastal towns and mountain communities to lakeside retreats and heritage districts, vacation rentals have become popular for high-amenity destinations. Airbnb, Vrbo and other similar platforms have helped landlords and property owners earn income from visitors who stay short-term. While these rental platforms can create income opportunities for homeowners and boost vacation spending, they also negatively impact social and housing-related costs.

The most obvious impact is the decrease of long-term housing supply. In tourism industry, the one that generate higher returns to investors is the short-term rentals, compared to traditional leases. And because of this, more and more homes and apartments that could cater housing to local residents are converted into vacation properties. This trend can make affordable housing difficult for workers, families, and young adults to find within their own communities. According to research, this expansion of short-term rentals has caused a significant rise in housing prices, increased competition for available homes, and displacement of communities in many regions dependent on tourism.

Housing affordability is not only the issue. A 2025 research examining high-amenity rural communities found that residents see short-term rentals as a threat to community wellbeing. According to participants, the rapid growth of short-term rentals for vacation has reduced the stability of neighborhood, compromised social connections, and changed their town’s character. They also note that transient populations have replaced the long-term relationship of their communities because “their neighbors are new every week”.

Familiarity, trust, and regular interaction among residents are the foundations of community wellbeing. Local organizations, schools, and civic groups may struggle to maintain participation when a significant share of homes become occupied by visitors rather than permanent residents. As neighborhoods become more accustomed toward tourists than local needs, residents often experience loss of belonging. Many members of the community feel that the benefits are not fairly distributed even though tourism generates economic activity because the costs are shared more broadly through higher rents and reduced housing options.

Another growing concern is the displacement of tenants. Low-income families may be forced to transfer to less desirable areas or places that are far from their workplaces as property values and the prices of rents go up. This trend can slowly change the demographic makeup of a community, replacing long-term residents with higher-income newcomers, short-term renters, or investors. In high-demand destinations, displacement may slowly happen over several years, making it unrecognizable until significant changes in the community have already taken place.

Because of this, many local authorities took action by introducing new regulations. Some of these are rental caps, licensing requirements, registration systems, and limits on the duration an occupant can rent a property each year. Research suggests that well-designed regulations can help balance the benefits of tourism with housing needs, though location and market condition also influence the results.

All in all, vacation or short-term rentals are tricky and present a complex opportunity cost. They can boost tourism economies and provide opportunities for income, but unregulated growth may negatively impact the stability of the community and housing affordability. As high-amenity markets continue to be popular to visitors and investors, authorities face the challenge of ensuring protection for local communities against tourism development.